Applied Materials forecasts revenue above estimates, shares fall on high expectations
A smartphone with a displayed Applied Materials logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration
Aug 13 : Applied Materials forecast fourth-quarter revenue above Wall Street expectations on Thursday, betting that unabated demand for advanced AI chips will continue to fuel robust spending on its semiconductor manufacturing equipment.
Even so, its shares dropped more than 5 per cent in extended trading as lofty investor expectations overshadowed the results. The stock has more than doubled this year.
Expectations are elevated as the chip equipment maker reports after peers Lam Research and KLA posted solid quarterly performances and forecast revenue growth, Stifel's Brian Chin said.
According to CFRA analyst Brooks Idlet, the results and the forecast were not enough to impress the Street, but the print was still solid as momentum clearly continues to improve. "We think calendar year 2027 consensus estimates leave room for upside if recent strength continues."
Applied Materials, which supplies equipment used in key wafer fabrication processes including deposition, chemical mechanical planarization and inspection, is benefiting from increased spending by chipmakers to support a rapid build-out of AI infrastructure.
It forecast fourth-quarter revenue of around $10.25 billion, plus or minus $500 million, compared with analysts' average estimate of $9.54 billion, according to data compiled by LSEG.
"We expect continued strong revenue growth in the second half of the calendar year, particularly in DRAM as well as leading-edge foundry-logic and advanced packaging," Chief Financial Officer Brice Hill said.
Applied expects overall packaging revenue to grow more than 70 per cent in calendar year 2026, ahead of its prior projection of over 50 per cent.
"Customers continue to give us longer visibility than we have ever had, with some conversations now extending to 2030," Hill said on a post-earnings call.
For the fourth quarter, Applied expects adjusted profit per share of $4.02, plus or minus 20 cents, compared with the estimate of $3.69.
It sees adjusted gross margin of 50.4 per cent, versus analysts' expectations of 50.15 per cent and in line with the third quarter.
Revenue for the quarter ended July 26 grew 25 per cent to $9.12 billion, surpassing the estimate of $8.99 billion.
